Five Quality Stocks To Buy Now

Welcome back everyone. Today on the Joseph Carlson Show. The market continues to go up. The passive income portfolio is doing well. It's growing at a brisk pace. Just today we're up 1.72%. We've gained nearly $15,000 and we're just getting started. The Story Fund, my secondary portfolio, is also doing great. It now has an all time gain of $141,000. On the day, it's up 1.59%. And of course, with both of these portfolios, we have extremely strong companies.

I call them compounding machines or high quality companies or they're just simply really good companies. These high quality companies are how we're getting these type of gains. Companies like S&P Global, MasterCard, Intuit, Moody's, Equifax are elite tear companies. We have companies like Costco, the best retailer on planet earth, booking holdings, high margin platform companies with dominant moats.

And we even have a few sleeper picks, ones that are less mainstream but are very dominant in their category, Texas Roadhouse being one of them. I invest in these companies that attract evaluations like we did with Apple years ago, making $34,000 in gains on that company. My original buys are up 3 to 4X from Apple alone. We bought Microsoft heavily at $220 per share. Now it's trading at 460. I take buying high quality companies seriously. It's not just something that I

say is nice to do or good. Theoretically, I have extremely high standards of the type of company that ends up in My Portfolio now. The market has been up over the past month or so as Trump has relinquished many of his tariff demands and we're seeing more of that today. Just a few days ago, Trump threatened the EU with 50% tariffs out of frustration from them being very slow to make a deal. Representatives from the EU said that they will speed up the deal making, but they need until at

least July 9th. So the tariff deadline is once again delayed only a few days after making it. This is the same thing we've seen a few Times Now with these tariff deals. Now, as the market raises up today, investors may believe that you missed the train, that stocks are now a bit too expensive to deploy your cash. And I personally believe that's the wrong take away. There are stocks that are still attractively valued in this market, and I'm going to highlight five of them in this

video today. Five companies that are both extremely high quality. They are compounding machines, and they are buys today based on their risk adjusted returns. We'll be going over all five of these quality companies and

discussing why they're buys today. And we start this off by highlighting company #1 which is FICO currently going down another staggering 9% cent or $155. Just today. The stock price is now approaching $1500 per share, which is notable because the stock entered this year at $2000 per share, and then it got as high as $2200 per share. Then within just a matter of days, the stock price is plummeted. Roughly 1/3 of the value has been chopped away just on recent news.

And what is causing all of this concern with FICO shareholders? Well, it's still this guy, Bill Pulte, the new Federal Housing director. He was just recently sworn into this position. And in many cases, like a new CEO, he wants to make a dramatic impact right out of the gates. One of the first things he turned his attention to was the closing costs on homes, specifically credit scoring from Housing Wire. Bill Poulte turns up the heat on FICO now. Now, all of this is new.

Some of this stuff was plans they had before he took this position. But he's certainly putting gas on the pedal. For example, with FICO specifically, one of the things they mentioned here was turning the system from a try merge to buy merge system. He says we're actively looking at getting this done. He secifically calls out FICO time and time again saying they should make sure they're being as economic as possible. And he says that I don't like some of the things I've heard in

terms of cost. He's wagging his finger at FICO for raising prices too aggressively. Now we know the consequences of this. If this system moves from Trimerge to buy merge, mathematically that would erase 1/3 of Fico's revenue, specifically with their scoring business. If we look at Fico's revenue overall, it's broken up into these three different categories. There's software, professional services and scoring. Now, the professional services is a small amount.

If we take that away, roughly half of FICO is the scores, the origination scoring is what's under pressure here. Now again, theoretically, if you were to move to a biomerge system, that would theoretically remove around 1/3 of this half of revenue. And this half of revenue is much higher margin than the other half. So this is a very lucrative portion of revenue.

So you may say, hey, Joseph, it makes sense that the stock is down around 30% when you're proposing something that may impact 30% of Fico's highly lucrative revenue. All of these arguments make sense theoretically, but in practicality, it's probably going to be a lot less impactful and FICO will likely end up a lot better than expected.

The first thing to consider is even if this is actually passed, it's unlikely that every mortgage broker will switch from Trimerge to by Merge. This is something that would make it optional, but not mandatory, and there are reasons to argue that a lot of lenders wouldn't want to switch to Buy Merge. The credit Bureau TransUnion makes this exact point in an analysis that examines the potential repercussions from switching from Trimerge to Buy Merge. Transunion's analysis found that

moving to a Buy Merge process could result in 2,000,000 consumers becoming ineligible for government sponsored enterprise mortgages. Their ineligibility would be due to gaps that can exist among lenders when it comes to reporting. Using only two credit scores will often result in an incomplete or inaccurate picture being painted of a potential borrower, particularly if the consumers most valuable set of credit data is in the one that's

getting excluded. So the big point here is that it's a bit like playing Russian roulette. Some of your credit information may be uniquely accounted for on one of the three credit bureaus. If you just pull two of the three, you may get incomplete credit data. And in some cases this could mean a more expensive interest rate on your loan, making it so it's significantly more expensive than had you just pulled all three credit ratings.

They say. Additionally, 600,000 new mortgage borrowers per year could end up paying more in interest under the Buy merge than they would have otherwise. With the Tri merge information being used, this could cost consumers around $6600 in additional interest over the life of the mortgages. Now that's a particular note here because pulling that third credit report probably costs

around $10. They go on to say that under the Buy merge, the first time homebuyers who have thin files, are new to credit could become unscorable, or if they are scored at all, could be charged a higher interest rate than they would otherwise. Just one missing trade line that may result from using one less credit report could dramatically impact eligibility and monthly payments. Now he's not exaggerating with this.

If you have a credit card that's only matched in one of the credit reports that gets excluded. That credit card where you've paid off your credit debt may make the difference of you being able to get into a home or not having one. Long term credit card being paid off continually and reported in one of the credit bureaus dramatically lowered our interest rate. He says ultimately, the decision to only use two credit reports could make all the difference in whether an interested home buyer

is able to buy a home or not. So we have the case where many customers may actually pay more by excluding that third credit rating if that third credit rating is containing any credit history that's beneficial to you. So again, this is like playing a bit of Russian roulette. You don't know if you're getting the best score because you don't

have a complete credit history. In addition to holding credit worthy borrowers out of the market, a by merge could have the reverse effect on otherwise ineligible borrowers, potentially increasing default risk. Incomplete information could also lead to consumers paying less interest than their true risk merits. The goal of scoring people's credit is to see the ability they have to pay back on that loan.

If you do not get an accurate picture, the customers either paying them more than they should or less than they should. The bank is either taking on too little of risk and overcharging people or they're taking on too much risk and undercharging. Either way, it's a less functional and less efficiently priced system. So right now the stock is down 30% on roughly 1/3 of half of the revenue.

And even that third of half of Fico's revenue is still up for debate and likely not going to go down by a complete 1/3. There are going to be many lenders that require the Tri merge system that they still want all three credit reports, many individuals that'll also want all three credit reports if they're excluded from a home. So the damage here may not be as

extreme as it first seems. Now you may also mention that this report is from one of the credit bureaus that benefits from having the Tri merge system, which is correct. They're trying to protect their business. But the people launching these attacks specifically against FICO are also people trying to protect their business. There are large lobbyist groups specifically from brokerages. Bill Pulte's on X reposting different posts from actual

lobbyist. In fact, this one right here that he retweeted is from the Broker Action Collation, which is a large lobbyist group for brokerages. Now this document goes over how FICO specifically with its credit closing costs have gone up tremendously over time, and they point out promptly how much FICO has raised prices. They say the average cost was $14.50 in 2023. In 2024 and 2025, it's $80.00 with the unregulated cost from a single credit report, which has up to two persons.

So this is basically like a two person report. And that's a price increase of up to 700%. And they are lobbying a call to action for Congress, the FTC, the FHFA, the CFPB, any entity that can to take these costs down to make it so that the FICO score is cheaper. Bill Poulte has stepped in saying thanks for the input. Still not happy with FICO. We should be making some decisions on all related items in the next one to three weeks.

So he's directly responding to these lobbyist groups saying that he's going to do exactly what they want and try to take down FICO. And since FICO is getting such focus from Bill Polte, I thought I would reply and just ask him a few questions now. He posted this about an hour ago. I just replied to it saying, Hey Mr. Polte, do you mind explaining how Fico's pricing is a bigger and more pressing concern to homebuyers than the mortgage broker fees or realtor commissions?

For reference, you would need approximately 180 FICO pull requests to equal the fees of one mortgage broker transaction. You'd need to pull your FICO score 600 times to equal a single realtor Commission on a sale. Other than the significant amount of lobbying that brokers and Realtors do, what reason do you have to focus on FICO more than these other costs? And I gave him a nice table of the relative expense of these different parties.

We have FICO here, which the average pulls around $40. So you pay $40 to get your credit from all three credit bureaus. The Trimerge system. Now, if we assume we're buying a $400,000 home, $40 compared to that $400,000 home is about 0.01% of the total sale. So you're paying 0.01. The mortgage broker group, which is largely the group responsible for putting all this pressure on FICO, saying that Fico's raised prices, that it's out of control, that consumers are paying too much.

They make an estimated $3600 to $7200 per home sale. Now that is .9 to 1.8%. Again, that's around 180 times what FICO charges. So you have the relative groups here. Then of course, you have the realtor commissions, so you have that 6% or $24,000 compared to the $40.00 of the FICO score. Then you have additional closing costs of eight to $15,000, that's 2 to 4%. Again, you compare that to the FICO score.

But out of all the things that he's focusing on that are difficult for people to afford when buying a new home, it's not the mortgage broker fees, it's not the Commission fees, it's not the closing cost that are all based on a percentage of the home sale. So they scale indefinitely with the price of the home. It's the $40 FICO score, something that no borrower has ever concerned themselves with

or ever worried about. And if you even want to go into more detail, this actually is better for FICO than it appears here because the estimated dollar amount here, that $40 is including the cost from the credit bureaus and FICO. So Fico's only a portion of that $40. They're not the entire cost. So FICO probably makes up more around 5:00 to $10 per pole, not $40.00.

So the reason that this is laid out is because anybody looking over the total cost of buying a home and anybody that's been through this process, the least of your concerns is the $10 FICO score. Nobody even cares about that. Nobody even notices it. But you do notice paying the mortgage brokers $7000. You do notice the closing costs and the realtor commissions. Those are real expenses that are big chunks of the overall transaction. Now, again, I replied to his post with this question.

We'll see whether or not he acknowledges it, but I'm not going to hold my breath. In reality, he doesn't have to respond to my post, he doesn't have to make any type of justification whatsoever. Most politicians and people in public office do what's best and most popular what their lobbyist and peers want them to do. Having a logical standpoint comes secondary. And there's also the fact that FICO has brought some of this upon itself.

You can't lay the blame on everyone else when FICO has exercised extreme pricing power over just a few short years. This is one of the concerns I expressed about this company years ago, that if you become in a dominant position and you exercise no restraint with your pricing power, if you push prices up too aggressively, too fast without any care to different businesses or consumers, it will raise

regulatory scrutiny. And that's exactly what FICO did back in March of 2024. I was looking over all these different companies and I said that I think my next buy is going to be Moody's. I'm thinking of buying it in $10,000 increments more of ADCA into the position. I've reviewed FICO. I think the East is too high and I don't really love how much they depend on insane pricing

power to lift the stock further. Moody's PE is high, but only because the stock has a huge slowdown in credit which should pick up over the next five years a lot, specifically if interest rates go back down. The analytics business is awesome. Super high retention, subscription income, and a ton of proprietary credit data that they own now. As of this comment that I left, FICO has gone up more than Moody's stock, so I would have had better returns if I bought FICO instead of Moody's.

But the concern here that I listed is still relevant. I don't really love how they depend on insane pricing or to lift the stock further. In a comment even before that one, I said, you know, I was listening to Warren Buffett and Charlie argue against Valiant and it reminded me a bit of FICO. Buffett basically said that buying exclusive rights over a drug and jacking up price is not a good business strategy and will lead to regulatory and

public backlash. Now, I'm not saying that Fico's exactly like Valiant, and obviously there's a big difference between buying exclusive drugs that are life savings and running mortgage credit ratings. But the fact remains that they rely high on this insane pricing power, which does attract regulatory and public backlash. And we're seeing that regulatory backlash now. So there's two ways to look at FICO.

One of them is that it's an exceptional company in an elite category of high margin, 0 cost of replication of its scores. It is deeply embedded in our financial systems, and the product is very difficult to replace and avoid making it so that it has substantial pricing power. The other side of this is that this is a company that's simply too good for its own good. It's a company that's pushed on the pricing pedal so hard that now it's getting laser focus

from regulators. So the story of FICO has become less clear, less predictable. If I have to pick a side today, my guess is that FICO will still be an exceptional investment, especially after this 30% trade down. This doubt gives you an opportunity to enter into a position on an exceptional company when one regulator's targeting the company. And in most similar cases with companies of this quality, now is a good time to buy now as we look through more high quality companies to buy today.

Another one that I'm going to continue to mention because I still believe this stock is high quality, undervalued and less appreciated than most other high quality companies. It's Salesforce. This is a company that I have $62,000 invested in. I'm currently basically flat on it, only up $500. Salesforce trades at 277 today, and it's come down from around 3:30 just a few months ago.

Now, Salesforce is actually in the green today, but this morning the stock was in the red because they announced another acquisition. And if you're Salesforce investor, you know that acquisitions aren't the thing that investors want Salesforce to do. After all, Salesforce has spent some of the most money on acquisitions, buying companies like Tableau and Slack for 10s of billions of dollars, massive amounts of money spent.

In many cases, investors believe they dramatically overpaid for these companies, hampering their future returns. So as soon as investors heard that Salesforce was acquiring another company, they sold, and that was the morning sale of the company. But then investors dug into the deal and now it's moved back into the green. Because once you actually dig into this deal, it's a lot better than previous deals that Salesforce has done. First of all, we can look at the company that Salesforce is

buying. They announced here that they're buying Informatica. When we bring up Informatica and look at what they actually do, it makes a lot more sense of why Salesforce is buying the company. Its core offerings include data integration, data quality, master data management, metadata management, and data governance, primarily delivered through a subscription based revenue.

Salesforce advertises this, saying that the planned acquisition will enhance Salesforce's Trusted Data foundation, critical for deploying powerful and responsible agentic AI. They highlight three different categories that this company will improve. Data transparency. Informatica's Advanced Integration Catalog and Lineage tools show where data comes from, how it has changed, and how it's used. Crucial for audibility and regulatory compliance data.

Understanding Informatica's rich metadata combined with Sales Forces Unified data model will empower AI agents to interpret, connect and act on enterprise data with meaningful context. And then data governance built in MDM, data quality controls and policy management ensure that all data driving AI is standardized, accurate, consistent and secure. Marc Benioff says that together Salesforce and Informatica will create the most complete agent ready data platform in the

industry. Salesforce has need for this product. This has been a weak point of the company and it solves that weak point and they compare it with their new agentic technology. So this isn't a simple bolt on acquisition. It's one that can be integrated into what Salesforce is already doing. But more to the point, when we look at the type of transactions that Salesforce has done historically, they've been some of the most overpriced, expensive acquisitions in the history of any company.

So it does raise some eyebrows of scrutiny when they're back to doing acquisitions. But the point that I'd like to raise is that in this case, it looks like Salesforce is being far more disciplined with what they're paying for these companies. Salesforce agreed to pay $8 billion for the company based on the $8 billion in their last quarterly free cash flow over the trailing 12 months.

That puts the deal out of 5% free cash flow yield, which is pretty good, but they also run a lot of stock based comp. When you adjust out the stock based comp, that puts the deal still at a 2% free cash flow yield. Not quite as attractive, but it looks better, especially noting that the free cash flow is growing while the stock based comp is declining. On an earnings basis, this company is not even trading at a 24 PE.

So this company doesn't look that expensive either by the free cash flow yield or the PE ratio or the price to sales. And that's likely why investors are reacting positively today. Typically when you see a large company like Salesforce buying a much smaller company, the smaller company will be in the green and the larger one will be in the red. But in this case both are in the green. So I believe overall this is. Is a well disciplined transaction by Salesforce showing that they're still

focusing on profits? Now the last thing I'll mention with Salesforce is this company's reporting earnings tomorrow. We're going to see some fireworks tomorrow as the stock trades up or down. If the stock goes down, that's not a concern for me. Salesforce is a very volatile company.

It trades up and down after earnings in many cases. Right now, Salesforce still trades at a cheap price and I expect this company to work its way back to 3:30 now. Next up, we have ASML, which is up $22.00 today, 3, 1%. It's always discouraging to want to buy a company when it's already gone up and you feel like you may have missed the best timing on it. That's not the way to look at stocks. Companies are not fixed entities. They're organic. They grow, they evolve over time.

Even though ASML is up 3% today, the company continues to make substantial progress in technological innovation and in the massive lead they have in EUV technology. It's nearly impossible for a human to actually comprehend the technology that goes behind these machines. ASML is doing some where nobody else so far can even figure out what they're doing. They are the sole producer of extreme ultraviolet lithography machines or the EUV machines.

Their latest device, this new EUV model is called the High NA or high Numerical Aperture machine, and it costs $400 million. Now this new model, the high NA machines, they have larger lens openings. In the previous EUV machines. The EUV light is created by firing lasers at molten tin droplets in a vacuum. The EUV light has a wavelength of 13.5 nanometers. Now specialized mirrors from Zeiss.

This is a German company that makes mirrors so flat you could spread them over the entire country of Germany. And the biggest imperfection will be less than a millimeter. That shows how precise these mirrors are. They are used to direct the EUV light. This nearly perfect mirror is a key ingredient to this. So SML already has a monopoly on the EUV machines, but now they're upping the ante, furthering the technology with these high aperture or open lens technology that can produce

things even smaller. That's the whole point is making it as small as possible. It's also significantly reduced the energy needed per wafer exposure for the machines since 2018. So they're not only doing the same thing, but they're doing it in an energy efficient way. And as they're releasing this new technology, ASML is off to the races, working on the next generation machines, Hyper NA, going another step past the high NA.

Even when they beat their best and there's no second place, they decide to run even faster and they need to do that. If you talk to employees from FML, they'll tell you that they have 10 or 20 year plans. That's how they can forecast their operating income and revenue so far out. They already know what they're going to be working on five to 10 years from now to keep the lead from any competitor, to make it so that any competitor is literally a decade behind.

So when we're looking at FML, we're looking at a stock 30% below its all time highs, trading at a historically low valuation in terms of free cash flow and the Ford PE ratio. It's a company that has an unparalleled technological mode. They're the only ones doing these devices and they continue to iterate. They continue to press on the gas pedal and move the technology further in the future. I expect this stock over the next couple of years to be well above $1000.

Now Next up, we have another key in My Portfolio, a stock that is

still undervalued today, incredibly high quality. And even though it's getting further recognized by the market, this one still has a ways to go. The company's Amazon, if we look at the story fund, Amazon is a significant holding. The total size is $124,000, thirty, 1600 of that being gains. Now if we look at this, Netflix is a bigger position, but that is because Netflix grew into a bigger position. Netflix has been an incredible investment.

It's gone up so much, but I've actually put more money into Amazon. I've invested heavily into this one because I continue to believe that we're going to see substantial gains in the future. The opportunities that Jassy highlights for Amazon are immense. This company's not just one that's a retail company or one where you get your packages in a couple days. It is a digital technology company with a huge amount of advertising, a huge amount of subscription services.

AWS makes up a gigantic portion of the overall revenue. Then you have the other bets like Project Kuiper and Zoox. They're going to have robo taxi soon. It's another company that's in every important vertical but doesn't get much credit for it because right now investors are seeing the cash flows go down. Meanwhile, the earnings per share of the company, which are accounted for differently but still represent earnings power of the company, continue to

grow. The company's underlying earnings power have grown significantly. I believe that Amazon could easily earn $80 billion of free cash flow in a year if they chose to, but they just consider the opportunities today too big. So Amazon is a company that's powerful, dominant, continually growing. It's defeated every bear thesis over the past couple of years, it trades at a lower PE ratio compared to its earnings growth, and the underlying power of its cash flows have increased

significantly. Right now, the stock is easily worth 260. Now the 5th and final one we'll mention here is Google. You guessed it, it's a company

that I can't leave out because it is both very high quality and the stock is trading at a discount. For all the concerns facing this company now, I've gone over many times and discussed the LLM threat, the AI threat, how Google's responding to it. I'm sure we'll discuss set in the future, but I want to focus on a different point in this analysis. When we look at Google, I just want to take a quick look at some of the fundamentals and compare them with a company trading at a much higher

valuation. I want to compare Google with Apple. The Ford PE of Google is 19, The Ford PE of Apple is 27 1/2. So Apple trades at a valuation on an earnings basis that's roughly 35% more expensive than Google today. Apple investors are pricing the company's earnings either more predictable or faster growing or a combination of the both. When we look at cash flows, Google's cash flows are priced at 3 1/2%. That's 2.5% when you're just for stock based comp.

We have Apple today. That's again 3.3 percent, 2.8% when you're just for stock based comp, very similarly be priced and free cash flow. When we look at what's going on with Google just over the past couple of years, we'll zoom into just the past five years. So they've over doubled their revenue in the past five years since 2020. And not only that, in the past year alone they've grown their revenue by 13%. We can go to Apple and look at

the exact same data. We can zoom into the past five years and you'll notice that the revenue has not doubled over the past five years. In the past one year, it grew 4.91%. Now the reason that Google's being priced the way it is with the Super low PE ratio below the market, way below companies like Apple is on the premise that the company may potentially be disrupted in the future.

That the company will have a difficult time dealing with artificial intelligence, LLMS and the new way that people are consuming information and the overall that could cause Google's growth to slow down. Now, another way of looking at that is that if Google's growth actually slowed down, it would look like Apple's. Apple's a company where their

growth has slowed down. In fact, I would argue that if Google's revenue looked like Apple's today, people would say that Google's already disrupted, the company's already gone through challenges. And look, it's showing up in the numbers. They're not growing anymore. That's what investors would be saying. But Apple's already at that point, and the company's still trading at a much higher valuation. And this isn't just with revenue.

In the past year, Google has grown its free cash flow by 8%. Apple's free cash flow went down by 3%. Google grew its earnings per share at a staggering 37% in the past year. Apple's earnings per share declined by a fraction of a percent last year. Google's EBITDA went up 39% last year. And Apple's EBITDA went up 6% last year. In every way possible. Google's growing much faster than Apple. And if Google matched Apple's growth rate, people would be saying that the stock is

disrupted. It's already price for failure when the company's succeeding, the company is being discounted for perceived risks that other companies don't have. And if the narrative changes at all, as the company continues to prove that they're adapting, they're growing, they're making new tools and implementing AI into everything they're doing, as that narrative changes and the fundamentals continue to grow, this one could be dramatically undervalued.

I could still see Google moving up to $220, making investors today a lot of money. Now. That's going to be it for this episode. Hope you enjoyed. See you in the next one.